In Defense Of Tax-exempt Bonds

CHICAGO — The Tribune editorial ``Abusing tax-exempt bonds`` (Sept. 26) called for ending the use of tax-free bonds for private purposes because they hurt taxpayers and burden the federal treasury.

This proposition has been bandied about for years with little regard for the facts. At the Illinois Development Finance Authority (IDFA)--which administers the sale of tax-exempt bonds to Illinois companies to save and create jobs--we believe your position is unfounded and warrants review.

A survey released in September by a consortium of bond issuers revealed that Small Issue Industrial Revenue Bonds actually result in higher net federal tax revenue for the treasury--not the ``intolerable drain`` suggested in your editorial.

According to the report, income lost to the treasury in the national Small Issue program actually is offset by bond users, who must pay added taxes because they have smaller federal tax deductions for interest payments and depreciation. Further, most evaluations of the Small Issue program do not take into account the additional tax revenues generated by bond-financed investments and payrolls.

Instead of creating a deficit, the report concludes that Small Issue Industrial Revenue Bonds have generated higher tax revenues, contributing up to $4 billion in additional treasury income over the last six years.

With IDFA`s help, more than $367.3 million in tax-exempt bonds and loans were issued in 1984 to help Illinois businesses save or create 3,700 jobs.